Layoff happy companies thrill investors

Really bad news for workers appears to be good news for investors. On average, the shares of companies that announced the largest mass layoffs in U.S. history are blowing away the market.

Microsoft’s (MSFT) layoff of 18,000 announced Thursday doesn’t rank in the top largest mass layoffs, but the market reaction is a classic example. Shares of the software giant are up 0.6% to $44.35 on the news. Shares of Microsoft have gained 6.5% from the month before the layoff was announced.

And that’s just a small illustration of what’s been a pattern between mass layoffs and stock prices.

The seven U.S. companies that announced the largest mass layoffs in history are up 247% from the month before the layoffs were announced on average, trouncing the 130% average gain of the Standard & Poor’s 500 during that same time, according to a USA TODAY analysis of layoff data from WESH-TV and market data from S&P Capital IQ.

The biggest reason why the average gains of layoff companies are beating the market is International Business Machines (IBM), which announced the granddaddy mass layoff of them all in July 1993. That month it said it would eliminate 60,000 jobs. Since the month before that announcement, shares of IBM are up 1,477%. During the same time, the S&P 500 is up just 338%.

Chart source: MSN Money

When you take out the outsized influence of IBM, by using the median gain instead of the average, the story changes dramatically. The median gain of the layoff companies, which reduces the affect of the outliers in an average, is 39.5%, which is trailing the 74% gain of the S&P 500 based on the same methodology.

Four of the seven mass layoff companies are actually lagging the market. Consider the case of Citigroup (C), which announced it was slicing 50,000 jobs in November 2008 amid the financial crisis. It was just one bank laying off workers then, but one of the biggest.

Shares of Citigroup, though, are down 64% from the month before the layoff announcement, trailing the 104% gain of the S&P 500 since then.

Below are the top seven largest mass layoffs and how the stocks have performed: